Don’t always squeeze every last drop
THESE ARE STRANGE CIRCUMSTANCES. New insights and concepts that were simmering below the surface are emerging, even in taxation. In this respect, this manifests itself in a particular form of paternalism, and this time not only in Belgium. Tax incentives have been introduced to give companies breathing space. In essence, those benefits may only be granted to those who have been loyal to the government in the past.
BELGIUM’S “INNER CABINET” reached a double agreement on taxation three weeks ago that has been described as a “bazooka”. Remarkably enough, it only seems to be reserved for companies displaying genuine patriotism. Companies with connections in tax havens would prefer to exclude the government from this support, under the “quid-pro-quo” motto. Here, companies risk missing out on benefits without breaking tax law. Maybe that can be justified as ethical. Acting ethically can be summed up as follows: it is not because you have the right to do something that you are right when you do it. In taxation, such a thought can prove counter-productive. Why would you pay more than the minimum tax? Why would businesses relinquish something they are entitled to?
AND YET, THERE ARE good reasons for not always wanting to squeeze every last drop. After all, companies do benefit from a stable fiscal climate. This can be achieved by steadfastly maintaining a predetermined course.
Companies benefit from developing a sustainable tax policy. In this case, there is no need to be more Catholic than the Pope
- Jan Tuerlinckx
IN THESE TURBULENT TIMES, companies should consider a sustainable tax policy instead. Sustainability in this case means that they are prepared to forego current tax incentives in exchange for long-term benefits. Anyone who jumps on any tax optimization measure without thinking it through will miss out more than once. For example, many companies have already created liquidation reserves and pre-emptively paid a 10 percent tax rebate, without ever being able to enjoy it. Improper reorganisations can cost entrepreneurs the exemption of capital gains on shares upon a sale. Anyone keen to avoid unexpected tax audits and who would rather not have to undergo expensive and protracted discussions with the tax authorities will also benefit from some restraint. The fact that any company’s average tax burden has experienced dramatic fluctuations over the years is no less than an open invitation to the tax authorities to carry out a thorough audit. And finally, the loss of reputation as a result of a squabble with the tax authorities cannot be underestimated.
EVEN WE DO NOT NEED to agree with the measures taken by the Inner Cabinet, this should be an eye-opener. Companies benefit from developing a sustainable tax policy. In this case, there is no need to be more Catholic than the Pope. Rather, they should develop a long-term vision with genuine self-interest in the medium term, without the distraction of quick gain. Crises are an opportunity to gain new insights.